Modelling Lean and Green Supply Chain

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Susana Carla Vieira Lino Medina Duarte

Mestre em Engenharia Industrial

Modelling Lean and Green Supply Chain

Dissertação para obtenção do Grau de Doutor em Engenharia Industrial

Orientador: Virgílio António Cruz Machado

Professor Catedrático, Faculdade de Ciências e Tecnologia

da Universidade Nova de Lisboa

Júri:

Presidente: Prof. Doutor Fernando José Pires Santana Arguente(s): Prof. Doutor Xosé H. Vásquez

Prof. Doutor Cristóvão Silva

Vogais: Prof. Doutora Susana Maria Palavra Garrido Azevedo

Prof. Doutora Virgínia Helena Arimateia de Campos Machado Prof. Doutor Virgílio António Cruz Machado

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Modelling Lean and Green Supply Chain

Faculdade de Ciências e Tecnologia and Universidade Nova de Lisboa

Copyright

A Faculdade de Ciências e Tecnologia e a Universidade Nova de Lisboa têm o direito, perpétuo

e sem limites geográficos, de arquivar e publicar esta dissertação através de exemplares

impressos reproduzidos em papel ou de forma digital, ou por qualquer outro meio conhecido ou

que venha a ser inventado, e de a divulgar através de reportórios científicos e de admitir a sua

cópia e distribuição com objetivos educacionais ou de investigação, não comerciais, desde que

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Acknowledgements

A special thanks to my Ph.D. supervisor V. Cruz Machado who encouraged me to pursue

this topic, help me to shape the path of my thesis and to achieve a clearer structure.

My sincere thanks to Fundação para a Ciência e a Tecnologia; without their support this

dissertation was not possible to perform (PhD fellowship: SFRH/BD/60969/2009).

To project entitled "Lean, agile, resilient and green supply chain management"

(LARG_SCM) which facilitated the development of my case study and make possible the

submission of papers at several International Meetings and Conferences.

To all companies that participated in the case study and helped to link the academic with the

industrial world.

Thanks to my Ph.D. colleague Helena Carvalho who contributed to make this period less of

a solitary initiative and more of a shared intellectual journey.

I also thank to Unidade de Investigação e Desenvolvimento em Engenharia Mecânica e

Industrial (UNIDEMI) for providing me with all necessary facilities.

A special thanks to my family, particularly to my children, my husband, my mother, my

father, and my parents-in-law for the patience, understanding, support, affection and

encouragement, they always gave me during the development of the work.

This thesis is in memory of my friend and colleague Marta Forte who encouraged me to

choose the Industrial Engineering degree course. Since then my life has always been about

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Resumo

O sucesso de uma organização depende do controlo efetivo de sua cadeia de abastecimento.

É importante reconhecer novas oportunidades para a organização e para a sua cadeia de

abastecimento.

Nos últimos anos a abordagem aos paradigmas lean, ágil, resiliente e green da cadeia de

abastecimento têm sido endereçados na literatura científica. Pesquisa neste domínio mostra que

a integração desses conceitos revelou algumas contradições entre tantos paradigmas. Esta tese

está principalmente focalizada para as abordagens lean e green. Treze diferentes frameworks de

gestão, incorporados como prémios, standards e ferramentas foram estudados para entender se

estes poderiam contribuir para o processo de modelação de uma abordagem lean e green. O

estudo revela uma série de categorias que são comuns na maioria dos frameworks de gestão,

proporcionando condições adequadas para a transformação da cadeia de abastecimento lean e

green. Foi proposto um framework conceptual para a avaliação de uma cadeia de abastecimento

lean e green de uma organização. O framework considera seis critérios-chave, a saber,

liderança, pessoas, planeamento estratégico, partes interessadas, processos e resultados. Foi

proposto um método de avaliação, considerando uma pontuação para cada um dos critérios. O

objetivo é entender como a cadeia de abastecimento lean e green podem ser integrados e testar a

sua compatibilidade, aplicando princípios, práticas, técnicas e ferramentas (isto é, elementos)

que suportam ambos, uma abordagem lean e uma abordagem green, em todos os

critérios-chave.

Um estudo de caso foi realizado na indústria automóvel, a montante na cadeia de

abastecimento para compreender mais profundamente se os elementos propostos para o

framework conceptual poderiam ser implementados num cenário da vida real. Com base no

framework conceptual e no estudo de caso, é apresentado um mapa para alcançar uma

transformação lean e green. O mapa proposto revelou a sua contribuição para a compreensão de

como e quando a cadeia de abastecimento de uma organização deve aplicar os elementos lean e

green. Este estudo é relevante para a prática, pois pode auxiliar os gestores na adoção de uma

abordagem na cadeia de abastecimento lean e green dando conhecimento para a implementação

de uma cadeia de abastecimento híbrida.

Palavras-chave: Lean; Green; Cadeia de abastecimento; Framework; Modelação; Caso de

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Abstract

The success of an organization depends on the effective control of its supply chain. It is

important to recognize new opportunities for organization and its supply chain.

In the last few years the approach to lean, agile, resilient and green supply chain paradigms

has been addressed in the scientific literature. Research in this field shows that the integration of

these concepts revealed some contradictions among so many paradigms. This thesis is mainly

focused on the lean and green approaches. Thirteen different management frameworks,

embodied in awards, standards and tools were studied to understand if they could contribute for

the modelling process of a lean and green approach. The study reveals a number of categories

that are common in most management frameworks, providing adequate conditions for a lean

and green supply chain transformation. A conceptual framework for the evaluation of a lean and

green organization`s supply chain was proposed. The framework considers six key criteria,

namely, leadership, people, strategic planning, stakeholders, processes and results. It was

proposed an assessment method considering a criteria score for each criterion. The purpose is to

understand how lean and green supply chain can be compatible, using principles, practices,

techniques or tools (i.e. elements) that support both, a lean and a green approach, in all key

criteria.

A case study in the automotive upstream supply chain was performed to understand more

deeply if the elements proposed for the conceptual framework could be implemented in a

real-scenario. Based on the conceptual framework and the case study, a roadmap to achieve a

lean-green transformation is presented. The proposed roadmap revealed its contribution to the

understanding on how and when an organization`s supply chain should apply the lean and green

elements. This study is relevant to practice, as it may assist managers in the adoption of a lean

and green supply chain approach, giving insights for the implementation of a hybrid supply

chain.

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List of Figures

Figure 1. 1 - Thesis organization ... 8

Figure 2. 1 - Supply chain structure ... 12

Figure 3. 1 - Deming Prize Framework ... 43

Figure 3. 2 - MBNQA Framework ... 44

Figure 3. 3 - EFQM Excellence Framework ... 45

Figure 3. 4 - The House of Shingo Prize Framework ... 47

Figure 3. 5 - ISO QMS Framework ... 53

Figure 3. 6 - BSC Framework ... 66

Figure 4. 1 - The LARG_SCM... 70

Figure 4. 2 - Number of publications by paradigms under study ... 71

Figure 4. 3 - Stages of data for lean-green supply chain transformation ... 73

Figure 4. 4 - The lean-green supply chain conceptual framework ... 73

Figure 4. 5 - Lean-Green weighting between criteria ... 95

Figure 4. 6 - Linking lean-green supply chain performance and the BSC ... 100

Figure 4. 7 - Cause-and-effect lean-green BSC ... 103

Figure 5. 1 - Case study research ... 111

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List of Tables

Table 2. 1 - Examples of the literature on hybrid supply chain ... 27

Table 2. 2 - Comparison of paradigms supply chains: summary of selected characteristics ... 31

Table 2. 3 - Number of papers in library databases (from 2000 to 2009) ... 37

Table 2. 4 - Number of papers in library databases (from Jan. 2010 to Apr. 2013) ... 38

Table 3. 1 - Characteristics of distinguished quality awards ... 49

Table 3. 2 - Changes in the awards over time ... 50

Table 3. 3 - Topics referred to in awards, standards and tools ... 59

Table 3. 4 - List of performance measures for the BSC perspectives ... 67

Table 4. 1 - Elements for a lean-green supply chain ... 75

Table 4. 2 - Guidelines for lean-green supply chain transformation ... 91

Table 4. 3 - Linkages between criteria score of quality awards ... 93

Table 4. 4 - Lean-Green criterion weighting calculation ... 95

Table 4. 5 - Lean-Green scale ... 96

Table 4. 6 - Lean-Green criterion calculation ... 97

Table 4. 7 - Calculation of the overall score ... 97

Table 4. 8 - List of performance measures identified for lean-green BSC supply chain ... 99

Table 5. 1 - Details of the case companies ... 109

Table 5. 2 - Overview of interviews ... 112

Table 5. 3 - General data of focal company ... 114

Table 5. 4 - Suppliers by geographical distribution ... 116

Table 5. 5 - Environmental certification date ... 118

Table 5. 6 - Assessment method applied to companies ... 134

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List of Abbreviations

ASC - Agile Supply Chain

BSC - Balanced Scorecard

DMAIC - Define, Measure, Analyze, Improve and Control

DP - Deming Prize

EDI - Electronic Data Interchange

EFQM - European Foundation for Quality Management

EMS - Environment Management System

EMAS - Eco-Management and Audit Scheme

ERP - Enterprise Resource Planning

FC - Focal Company

GRI - Global Reporting Initiative

GSC - Green Supply Chain

GVSM - Green Value Stream Mapping

IP - Industrial Park

ISO - International Organization for Standardization

JIT - Just-in-time

LARG_SCM - lean, agile, resilient and green supply chain management

Lean-Green - Lean and Green integrated approach

LCA - Life Cycle Assessment

LSC - Lean Supply Chain

LSP - Logistics Service Provider

MBNQA - Malcolm Baldrige National Quality Award

Mthg - Methodology

NIST - National Institute of Standards and Technology

NP - Portuguese Norm

OH&S - Occupational Health and Safety

OHSAS - Occupational Health and Safety Assessment Series

QMS - Quality Management System

PDCA - Plan, Do, Check and Act

RDI - Research, Development and Innovation

RSC - Resilient Supply Chain

SC - Supply Chain

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SCOR - Supply Chain Operation Reference

SP - Shingo Prize

TPM - Total Productive Maintenance

TQM - Total Quality Management

VSM - Value Stream Mapping

3R - Reduce, Reuse and Recycle

5S - Sort, Straighten, Shine, Standardize, and Sustain

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1. Introduction

This chapter introduces the research aim and its objectives; the research question is

formulated, and the methodology applied in the development of the thesis is described. It

concludes with a brief description of the thesis structure, indicating the papers that have been

published to support the development of each chapter.

1.1. Aim

The extremely competitive business environment, with rapid changes in markets and the

focus on customer orientation, have forced organizations to adjust their supply chain (Shepherd

and Gunter, 2006). Organizations worldwide are continuously trying to develop new and

innovative ways to develop competitive advantage and strengthen their brand image (Rao and

Holt, 2005).

Several factors are becoming increasingly critical and may influence the business

environment namely, globalization, technology innovation, new organizational skills, design of

products and services, customized customer demand, or environmental protection and resource

scarcity (Broek, 2010; Shepherd and Gunter, 2006; Carvalho et al., 2011a; Cetinkaya, 2011);

these factors affect organization`s supply chains in various ways, resulting in new requirements

on supply chain management (Broek, 2010).

Supply chain promotes interdependency between organizations - organizations are entities

of the supply chain management considering suppliers, focal companies and customers which

are linked by information, material and cash flows (Kainuma and Tawara, 2006; Seuring and

Muller, 2008). The objective is to satisfy the customer needs to the lowest possible cost for all

entities, with the right product or service, in the right quantities, in the right time and in the right

place, assuring a continuous flow through the supply chain (Cruz-Machado, 2007).

To stay competitive in the market, organizations must achieve a product or service with

higher quality, with a reduced cost and in less time than ever before. They also want to be seen

as the ones that conduct their business in a responsible manner, being aware of supply chain

activities` impact on environment (Srivastava, 2007; Zhu et al., 2008; Mollenkopf et al., 2010).

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improvement: exploring new paradigms as lean, agile, resilient and green in supply chain may

change practices in order to obtain a more efficient and sustainable supply chain. The

importance to be both lean and green begins to be a business concern (Broek, 2010).

The lean paradigm improves quality and productivity by eliminating waste and at the same

time reduces cost and time, satisfying customer needs (Ryder, 2011; Venkat and Wakeland,

2006); lean is focused in optimizing the processes of all the supply chain, searching for

simplification and reducing activities that do not add value. The lean paradigm asks for

workforce reduction, space reduction, increased capacity utilization, higher system flexibility

and use of standard components (Pettersen, 2009).

The green paradigm aims to reduce environmental impacts while eliminating environmental

waste in organizations (EPA, 2007); green is centered in achieving profit and market share

objectives, by reducing environmental risks and impacts while improving ecological efficiency

of organizations and their partners (Zhu et al., 2008). The green paradigm asks for practices

such as reduce, reuse, rework, recycle, return or remanufacturing (Srivastava, 2007). This

paradigm becomes an approach that effectively establishes strategic differentiation (Broek,

2010).

Recent studies have highlighted the importance of this topics; research with both paradigms

(lean and green) is found in Dües et al. (2013) where the relationships between lean and green

in supply chain are explored. Kainuma and Tawara (2006) propose a lean and green supply

chain extended the supply chain to include reuse and recycling throughout the life-cycle of

products and services, considering a reverse supply chain. Mollenkopf et al. (2010) evaluate the

convergence and divergence of both paradigms and indicates how organizations can manage the

supply chain applying the synergies available.

The supply chain can be considered as a hybrid system, deploying a number of principles,

practices, techniques and tools - which will be considered to in this thesis as "elements" - for

both paradigms. Gordon (2001) mentioned that organizations should determine the products to

supply, the type of containers to use, and the type of the transport mode to use and the exact

information to share and consequently minimizing the cost and the lead-time and, at the same

time, reducing the environment impact. Vais et al. (2006) considered lean and green through the

deployment of the 3R`s (reuse, reduce and recycle). Others elements are considered as starting

points namely Kaizen events, 5S or Value Stream Mapping (EPA, 2007; AME, 2008; Venkat

and Wakeland, 2006; Torielli et al., 2011). The leadership empowerment, continuous

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relationship and information sharing are further elements mentioned in a lean and green supply

chain (Puvanasvaran et al., 2011; EPA, 2007; Johansson and Winroth, 2009; Bergmiller and

McCright, 2009).

The deployment of lean and green elements seems to be vital for the business to stay

competitive. However, it is still very difficult to integrate a number of supply chain elements, as

they seem to be contradictory and may lead to tradeoff situations. A well-known example by

academicians is the need for frequent replenishment, required by lean approach with

just-in-time delivery or small lot size that generates more transportation and high levels of carbon

dioxide emissions (Zhu and Sarkis, 2004; Venkat and Wakeland, 2006; Sawhney et al., 2007).

Supply chains need to answer to customer needs and combining these two paradigms

requires additional attention and research (Johansson and Winroth, 2009; Azevedo et al., 2012).

Organizations must develop solutions that mitigate undesirable consequences to optimize the

supply chain performance (Mollenkopf et al., 2010). Conventional management practices are

not enough to ensure the long-term success of businesses (Talwar, 2011). There are a number of

management frameworks to help organizations to streamline the supply chain processes and

improve the organizational performance (Talwar, 2011). There are management frameworks to

assist the lean transformation (SP, 2010) and others for the green transformation (ISO 14001,

2004). For example, the Shingo Prize framework evaluates a lean transformation

(Cruz-Machado, 2007). For a green transformation, the management system ISO 14001 assist in the

implementation of green supply chain issues (Nawrocka et al., 2009).

The lean and green approaches should act at different business levels to influence supply

chain activities. The understanding of paradigms` influence at strategic, tactical or operational

level should be important for the lean and green supply chain transformation. Dües et al. (2013)

mentioned that to establish the best lean and green integration, it is necessary to understand the

characteristics of the both paradigms; they consider that lean and green can have a positive

influence in current business practices. The lean and green considerations should be part of

every business decision and must be aligned with supply chain management. Be aware of the

compatibility among lean and green paradigms will assist to draw a lean and green integrative

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1.2. Objectives

This research work intends to study how lean and green can be compatible in a supply chain

context and how to develop an improved synchronized implementation. To attain this purpose,

two main objectives were considered. The first, is to develop a framework for the

implementation and evaluation of a lean and green organization`s supply chain; the second

objective is to propose a roadmap to indicate how to achieve and progress a lean and green

supply chain transformation. To accomplish these objectives, the fundamental research

questions addressed in this thesis are the following:

 How supply chain management paradigms are being applied and integrated? A

literature review on supply chain management paradigms is carried out, to analyze the

paradigms characteristics and how they are integrated into supply chain management.

 How management frameworks give insights to modeling the supply chain?A literature

review on different management frameworks is carried out, to investigate their

similarities in order to link data between these frameworks and consider as referentials

for supply chain management.

 How to model the lean and green paradigms in the supply chain management context?

How to evaluate the lean and green implementation? A lean-green supply chain

conceptual framework for the implementation and evaluation of a lean-green

organization`s supply chain is proposed.

 How organizations implement the lean-green supply chain elements in a real-scenario?

A case study in the upstream supply chain is performed to test qualitatively the validity

of the proposed conceptual framework.

 How lean-green elements should be deployed to have a lean-green supply chain

transformation? An oriented-tool is developed to indicate in which moment the

lean-green elements should be implemented so that the organization`s supply chain may

achieve and progress to a lean-green transformation; that is, to explain when and where

the lean-green elements should be deployed to transform the actual supply chain in a

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1.3. Methodology

This scientific research was integrated in an international research project entitled "Lean,

agile, resilient and green supply chain management", funded by Fundação para a Ciência e a

Tecnologia (project MIT-Pt/EDAM-IASC/0033/2008). The purpose of this research project was

to develop a deep understanding of the relationships between lean, agile, resilient and green

paradigms in the context of supply chain management. The participation in this project was vital

for the development of this dissertation.

The research methodology involves different phases to achieve the main objectives. The

first objective could be reached through the literature review. Two different areas were under

study:

First, by the identification of the supply chain paradigms it could understand their

characteristics and combinations. The study focused on four different supply chain paradigms,

to recognize the importance of each on the supply chain and for academicians and practitioners.

Therefore, a structured literature review was carried out, to provide a comprehensive

understanding on the paradigms implementation in supply chain management context. A

state-of-the-art literature review was performed in order to identify the principal configurations and

contributions of lean, agile, resilient and green supply chain paradigms and their combinations

and tradeoffs. A classification scheme was developed with the intention of providing a

comprehensive review of the available literature.

Second, another study was developed to obtain understanding on different management

frameworks. A contribution proposed by this research is to study the characteristics of different

management frameworks and their similarities in order to link data between them. Each of these

management frameworks have different purposes, but were selected as referentials for

modelling a supply chain. A characterization of each management framework, namely awards,

standards and tools, is presented and discussed. Thirteen management frameworks were under

study, namely:

 business awards (such as Deming Prize, Shingo Prize, Malcolm Baldrige National

Quality Award and European Foundation for Quality Management, all of them are

worldwide recognized);

 management standards (i.e. as Quality Management, Environmental Management,

Health and Safety Management, Innovation Management, Six Sigma and Social

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 management tools (namely, Supply Chain Operations Reference Model,

Eco-Management and Audit Scheme and Global Reporting Initiative).

This study helped to understand that almost all the management frameworks mentioned

similar characteristics, the need for leadership, people, strategic planning, stakeholders,

processes and results. Moreover, a literature review on performance measurement system was

carry out, to understand how supply chain performance can be evaluate. These analyses provide

some inspiration for modelling a lean and green supply chain environment.

The contribution to modelling a lean and green supply chain was developed through a

conceptual framework. This conceptual framework seeks to cross-data between the information

collected from management frameworks and the lean and green supply chain approach; the six

categories common to management frameworks were considered important to model a lean and

green supply chain. Thus, the conceptual framework assumed six main criterions, namely

leadership, people, strategic planning, stakeholders, processes and results. It was considered for

each criterion a number of lean and green supply chain elements and the guidelines were

designed. In addition, it was proposed a criteria score for each criterion and an assessment

method for lean-green supply chain implementation. This framework was designed with the

intention to assist organizations to evaluate their business in terms of a lean-green supply chain.

The research took into consideration that it was necessary to examine how lean-green

elements are being implemented in a real-scenario. Therefore, a case study approach was

considered in the methodology for this research. The case study was conducted at a Portuguese

automotive supply chain to test qualitatively the validity of the proposed conceptual framework.

This kind of industry was selected due to the high levels of implementation of lean and green

paradigms. The research covers different companies of the same supply chain to understand the

integration between lean approach and green approach. To conduct the case studies a structured

interview protocol was designed to guide the interviews. The study focused on a focal company

and their suppliers located in an Industrial Park, nearby. The case study helped to understand

how elements are implemented in a real supply chain.

The second objective is reached by the outputs from the conceptual framework and from the

findings and evidences of the case study. A roadmap oriented-tool was developed; it considered

the stages of a lean-green supply chain transformation, indicating when and where activities

should be executed. The objective of this model is to give know-how to implement a supply

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In this research the "lean-green" term represents the lean and green integrated approach,

considering lean-green supply chain as a hybrid supply chain.

1.4.

1.5. Chapter overview

This chapter provided an overall introduction to the research and an orientation to the

research context. It was identified the purpose of the research; this thesis intends to study the

lean and green supply chain theme. Two main objectives were considered for this research and

the methodology to achieve those objectives was described. The organization of the thesis is

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2. Supply Chain Management Paradigms

Supply Chain Management (SCM) has been a topic of interest among organizations. It is

possible, in the definition of supply chain (SC), to find a number of subjects such as cost, time

and quality, as well as concepts like lean, agile and responsiveness, and more recently,

vulnerable and resilient (Xu, 2008) as well as green supply chains (Srivastava, 2007). In this

chapter were selected four different supply chain paradigms. These paradigms were focussed on

a research project, that have been developed during the last 4 years, with the title "Lean, agile,

resilient and green supply chain management" with the acronym "LARG_SCM". This chapter

discusses these paradigms and the strategies and methodologies for designing supply chains that

meet specific customer expectations. The objective of this chapter is to analyze their

characteristics and whether these paradigms are being integrated at the SCM.

2.1. Supply Chain Pressures and Paradigms

2.1.1. Supply Chain Management

SCM has become a new and promising way of obtaining competitive advantages in the

market (Shepherd and Gunter, 2006). In an operating system there are dependencies and

fluctuations, and when these are combined in a delivery system the fundamental characteristics

can be observed at the SC level (Stratton and Warburton, 2003). The SCM can be defined as a

set of interdependent organizations that act together to control, manage and improve the flow of

materials, products, services and information, from the point of origin to the point of delivery

(the end customer) in order to satisfy the customer needs at the lowest possible cost to all

members (Lambert et al., 1998). According to Speckman et al. (1998), the essence of SCM is

seen as a strategic weapon by which to develop a sustainable competitive advantage by limiting

the investment to be made without sacrificing customer satisfaction.

According to Vonderembse et al. (2006) SCM integrates suppliers, manufacturers,

distributors and customers through the use of information technology to meet customer

expectations efficiently and effectively. Consequently, groups of companies can respond

quickly and in an unified manner with high quality, differentiated products demanded by

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Gunasekaran et al. (2001) propose that SC is a system whose constituent parts include

material suppliers, production facilities, distribution services and customers linked together via

the feedforward flow of materials and feedback flow of information. Lambert and Cooper

(2000) consider "members of a supply chain include all companies/organizations with whom the

focal company interacts directly or indirectly through its suppliers or customers, from point of

origin to point of consumption". Christopher and Peck (2004) defined the SC as "the network of

organizations that are involved, through upstream and downstream linkages, in the different

processes and activities that produce value in the form of products and services to the ultimate

consumer." Additionally, providing the customer (in an efficient, effective way) with the right

products and services at the right place and at the right time, in the right quantities and with the

required specifications must be attended properly to ensure a continuous flow in the supply

chain (Cruz-Machado, 2007). Thus there are three different continuous main flows in a typical

SC: material flow, information flow and cash flow. The SC partners may openly share

information that facilities their ability to jointly meet end-customers needs (Speckman et al.,

1998). According to Seuring and Muller (2008), focal company is who rule the supply chain,

provide the direct contact to the customer and design the product or service offered. Based on

the authors Lambert and Cooper (2000) and, Anand and Kodali (2008) Figure 2.1 shows a

supply chain structure.

Figure 2. 1 - Supply chain structure

The good management of the SC means it is necessary that the entire set of processes and

activities must be viewed as a single system. The full strategy in SCM has three points of focus

(Kim et al., 2004): i) structure, which deals with the issue of the location of facilities and

processes by stage within the supply chain; ii) organizational, which includes the determination

of which organization takes direct responsibility for each stage of the supply process and the

inter-organizational relationships; and iii) process, which covers the issues of planning,

performing, controlling operations and processes that need to be coordinated.

Material Flow Information Flow Cash Flow

3rd-tier

to Initial-

Supplier

2nd-tier

Supplier

1st-tier

Supplier

Focal

Company

1st-tier

Customer

2nd-tier

Customer

3rd-tier

to

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Vonderembse et al. (2006) assert that questions remain about how SCs works and how

deeply SC concepts are established in manufacturing organizations. In their view, researchers

are investigating the factors needed to design and build effective SCs.

The lean, agile, resilient and green paradigms have thus far been explored from an

independent perspective but can be integrated in supply chain. Therefore SCs can be influenced

by the different management practices of each paradigm. However they also can merge to have

a better way of work where the materials flows, the information flows and cash flows are

optimized.

2.1.2. Lean Supply Chain

The production system developed by Taiichi Ohno at Toyota Motor Corporation, in

post-war Japan, created what became known as the Toyota Production System (TPS). Since then,

TPS has continuously evolved and become known in the West, initially as just-in-time (JIT)

production (Womack and Jones, 2003; Reichhart and Holweg, 2007). Subsequently, it was

popularized as lean production or lean thinking (Reichhart and Holweg, 2007; Ozelkan et al.,

2007).

Lean thinking helps to understand the principles of lean (Womack and Jones, 2003; Melton,

2005; Venkat and Wakeland, 2006):

 the identification of value and the definitions of value propositions for specific

customers;

 the elimination of waste, whereby any activity in a process that does not add value to

the customer is called waste (determine the best sequence for value creating steps);

 the generation of flow (perform the activities without interruption when a customer

requests them);

 and continually improve the process.

The basic forms on the reduction and elimination of waste have been identified as:

overproduction, waiting, transportation, inappropriate processing, inventory, unnecessary

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According to Hines et al. (2004), lean had moved away from being merely a "shop-floor

focus" on waste and cost reduction to an approach that consistently sought to increase value for

customers by adding product or service features and removing wasteful activities.

Considering it at the operational level, the lean paradigm is implemented using a number of

tools and techniques that included Kanban (visual signal to support flow by "pulling" product

through the manufacturing process as required by the customer), 5S (a visual housekeeping

technique that devolved control to the shop floor), Visual Control (a method of measuring

performance), Poke Yoke (an "error-proofing" technique), SMED (a technique for the reduction

of changeover) and takt time (the rhythm of sales ) (Melton, 2005; Bhasin and Burcher, 2006).

The application of these tools and techniques brings improvements such as: i) decreased lead

times for customers; ii) reduced inventories for manufacturers; iii) increased process

understanding; iv) less process waste; v) less reworking and vi) financial savings (Vonderembse

et al., 2006). According to Bhasin and Burcher (2006), it is important that organizations practice

most of those techniques and tools.

The term "lean" comes from the upside of the production method that uses less of

everything: "half the human effort, half the manufacturing space, half the investment and half

the engineering hours to develop a new product in half the time" (Melton, 2005; Qi et al., 2007).

Lean manufacturing is associated with "zero inventory" and the JIT (Just-in-time) approach.

The lean approach has been considered to perform better when there is high volume, low variety

and stable, predictable demand with certainty of supply and low level inventory (Vonderembse

et al., 2006; Naylor et al., 1999).

Today, this paradigm is dominant in manufacturing and reaches from customer needs right

back to raw material sources (Venkat and Wakeland, 2006; Reichhart and Holweg, 2007; Hines

et al., 2004). This provided the link between the lean paradigm and the supply chain because,

for the first time, the production pull was extended beyond the boundary of the single factory to

include the upstream and downstream partners (Hines et al., 2004). Reichhart and Holweg

(2007) identify three different moments that in turn define the lean concept in the value chain:

the principles of lean production began to evolve in the 1950s and were extended to supplier

operations from the 1970s onwards; the distribution function only started from the late 1980s.

According to Melton (2005), lean is about the complete change of our business, how the

supply chain operates, how the directors direct, how the managers manage and how employees

go about their daily work. He defined that lean can be applied to all aspects of the SC and

should be applied if the maximum benefits within the organization are to be sustainably

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The creation of a lean supply chain (LSC) requires the examination of each process and the

identification of unnecessary resources that can be measured in costs, time or inventory

(Cruz-Machado, 2007; Womack and Jones, 2003; Vonderembse et al., 2006), as well as the

elimination of waste or non-value steps along the chain and the low-cost delivery of a

standardized, stable product (Stratton and Warburton, 2003). Therefore, improvements in

competitiveness and overall profitability are expected (Vonderembse et al., 2006). LSC is

supported by efforts to achieve internal manufacturing efficiencies and reductions in setup time,

which facilitate the economic production of small quantities and, to some degree, enhance cost

reduction, profitability and manufacturing flexibility (Vonderembse et al., 2006).

According to Naylor et al. (1999), the lean paradigm can be applied to the SC upstream of

the decoupling point (the point at which strategic stock is often held) because the demand is

smooth and standard products flow through a number of value streams. Reichhart and Holweg

(2007) discussed lean distribution or the downstream system, defining it as the minimization of

waste in the downstream supply chain. By demanding a certain quantity of a product that

information propagates upstream through the supply chain, the right amount of product can

move downstream in the shortest possible time with a minimum of waste (Reichhart and

Holweg, 2007; Venkat and Wakeland, 2006). Lean logistics, as extended to the entire SC,

requires frequent replenishment of goods in small amounts at every point in the provision

stream as well as the compression of the provision stream in time and distance (Venkat and

Wakeland, 2006).

There are many research opportunities and contributions with this issue: Reichhart and

Holweg (2007) explore the conflicts between lean distribution and lean production and

emphasize the strategies by which to solve this issue; Ozelkan et al. (2007) present a case study

on the implementation of lean system concepts; Melton (2005) gives the background on lean

thinking; Hines et al. (2004) provide a framework for understanding the evolution of lean (as a

concept and implementation) and point out areas for future research; Bhasin and Burcher (2006)

present a conceptual paper in which they argue that an aspiring lean enterprise can only succeed

if it views lean as a philosophy rather than another strategy.

However, some difficulty in implementing a lean SC may appear. The lean approach has

been criticized in many respects, such as its limited applicability outside high-volume or

repetitive manufacturing environments (Hines et al., 2004); the resulting lack of definition has

led to confusion and fuzzy boundaries with other management concepts (Hines et al., 2004).

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numerous lean failures. Managers must view lean as a long-term strategy (Bhasin and Burcher,

2006).

2.1.3. Agile Supply Chain

Given the era of time-based competition, high-speed and low cost, organizations are unable

to respond to unexpected changes in demand and supply (Lee, 2004). Agility is a business wide

capability that embraces organizational structures, information systems and logistics processes

(Christopher and Towill, 2000). Most organizations ignore the idea that a SC should be agile

(Lee, 2004).

An agile supply chain (ASC) has the ability to rapidly align its activities and operations for

response to changes in customer needs and markets (Naylor et al., 1999, Qi et al., 2007;

Baramichai et al., 2007). It calls for a high level of rapid reconfiguration and will eliminate as

much waste as possible, but it does not emphasize the elimination of all waste as a prerequisite

(Naylor et al., 1999).

Agile has its origin in the flexible manufacturing system (Christopher and Towill, 2000; Qi

et al., 2007). Subsequently, the flexible manufacturing was extended into the wider business

context and the concept of agility as an organizational orientation was born (Qi et al., 2007).

Indeed, ASC has emerged as a generic term with particular tendencies, and it is commonly

referred to as a distinctly different paradigm from LSC (Stratton and Warburton, 2003;

Bernardes and Hanna, 2009; Christopher and Towill, 2000). Most SCs survive by pitting speed

against costs, but agile ones respond both quickly and cost efficiently (Lee, 2004).

The agility of a SC may determine the organization`s survival. The key components of agile

capabilities are considered to be speed, quality, flexibility and responsiveness (Vonderembse et

al., 2006; Qi et al., 2007; Baramichai et al., 2007; Christopher and Towill, 2000; Stratton and

Warburton, 2003). The unpredictable business environment can disturb and cause changes to

any SC segment, such as purchasing, manufacturing and distribution; these changes require that

the organization search for new ways to improve its agile capabilities in order to maintain its

competitive advantages (Baramichai et al., 2007). Thus the organization needs to improve the

agility of its supply chain by: i) implementing the right approach in configuring the supply

chain; ii) establishing relationships with its partners (Christopher and Towill, 2000); iii)

allowing the mobilization of global resources to develop changes in technology and material

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prepared for shocks such as natural disasters, epidemics and computer viruses (Lee, 2004). It is

important to draw up contingency plans and develop crisis management teams (Lee, 2004).

The drivers for agility include ever shorter response cycles, representing a change from

static systems with significant time allowances; batched information flows and periodic decision

making; and dynamic systems where change, information flow and decision-making are

continuous (Baramichai et al., 2007).

According to Baramichai et al. (2007), "An agile supply chain is an integration of business

partners to enable new competencies in order to respond to rapidly changing, continually

fragmenting markets. The key enablers of the agile supply chain are the dynamics of structures

and relationship configuration, the end-to-end visibility of information and the event-driven,

event-based management."

Naylor et al. (1999) assert that the agile paradigm "means using market knowledge and a

virtual corporation to exploit opportunities in a volatile marketplace." These authors used the

decoupling-point concept to separate two distinct parts in the supply chain. In their view the

agile paradigm must be applied downstream from the decoupling point (where demand is

variable, with less predictable environments and high product variety).

Agarwal et al. (2007) have shown that the agility of the SC depends on customer

satisfaction, quality improvement, cost minimization, speed of delivery, new product

introduction, service-level improvement and lead-time reduction. For them, three variables,

namely the use of IT tools, centralized and collaborative planning and process integration are

significant drivers. Consequently, they must be the top priority for an agile SC. The literature on

SC agility describes the dependence of agility on the characteristics of certain performance

variables, but the influence of interrelationships among the variables has barely been considered

(Agarwal et al., 2007). Lee (2004) presents four methods for becoming an ASC:

 continuously provide supply chain partners with data on changes in supply and demand,

so they can respond promptly;

 develop collaborative relationships with suppliers and customers in order to redesign

processes, components and products;

 finish products only when you have accurate information on customer preferences;

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Various approaches to agile supply chain management practice have been identified: Khan

K et al. (2009) identify the critical distribution practices of agile supply chains and tests their

association with organizational performance; Baramichai et al. (2007) focus their research on

ASC capability improvements and propose a tool whereby the approach is to achieve agility in

the supplier-buyer supply chain; Yusuf et al. (2004) propose a conceptual model for assessing

the capability of an ASC, and explore the relationship between the emerging patterns and the

attainment of competitive goals; Agarwal et al. (2007) develop a framework that identifies

variables influencing SC agility and establishes interrelationships; Lee (2004) compares three

terms in the supply chain, namely "agile," "adapted" and "aligned"; Bernardes and Hanna

(2009) propose a study on the related terms "flexibility," "agility" and "responsiveness," and try

to clarify the differences between those terms.

However, there is a lack of understanding on how to help organizations to improve their

agility and which tools, methodology and techniques can be used in practice (Baramichai et al.,

2007). Supply chain agility can be founded on business processes and structures that facilitate

speed, adaptation and robustness, and which are capable of achieving competitive performance

in a highly dynamic, unpredictable business environment (Khan K et al., 2009).

2.1.4. Resilient Supply Chain

Many types of unpredictable disasters have occurred during the past several years, including

terrorist attacks, wars, earthquakes, economic crises, tsunamis, strikes, computer virus attacks,

hurricanes, storms, extreme weather conditions, diseases, political instability, vandalism and

theft, among others. Historical data indicate that the total number of natural and man-made

disasters has risen dramatically over the past 10 years (Tang, 2006; Carvalho and

Cruz-Machado, 2007).

Today’s business environment is characterized by higher levels of turbulence and volatility

(Carvalho and Cruz-Machado, 2007), and SCs tend to break down and take a long time to

recover, particularly when major disruptions occur. Disruptions can arise from many sources,

and every activity that a SC conducts faces the inherent risk that an unexpected disruption could

occur (Ponomarov and Holcomb, 2009). Long and complex global SCs are usually slow to

respond to changes, and they are more vulnerable to business disruptions (Tang and Tomlin,

2008). The management of supply chain disruptions turns one`s perspective around, making it

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the supply chain (within reasonable limits) to sustain and absorb disruptions without serious

impact (Xu, 2008).

Organizations need to find the right balance of capacity because, with exceptionally open

boundaries, they face substantial risks of being disrupted by outside events (AMA, 2006).

According to the American Management Association (AMA, 2006), SCs are important focuses

of disruptions and are targets for building-up resilience. Supply chains have been designed to

optimize cost and/or customer service, but rarely has resilience been an objective in the

optimization process.

The resilient concept is rooted in materials science as "the physical property of a material

that can return to its original shape or position after a deformation that does not exceed its

elastic limit" (Xu, 2008). According to Peck (2005), this concept was adopted because it fits

comfortably with the view of SCs as interacting networks. The resilient paradigm focuses on

how well an organization resists disturbances and how quickly it can return to its original state

or move to a new, more desirable one after being disturbed (Christopher and Peck, 2004;

Christopher and Rutherford, 2004; Peck, 2005; Xu, 2008).

The concept of resilience is directly related to important issues such as ecological and social

vulnerability, the politics and psychology of disaster recovery, and risk management under

increasing threats (Ponomarov and Holcomb, 2009). Xu (2008) asserts that resilience can

potentially be a competitive advantage to respond more favourably to disruptions than the

competitors. There are cases where disruptions will affect the competitors equally and it is

important not to underestimate the company culture that responds quickly to the implications of

the changes that occur around it (Sheffi and Rice, 2005).

A case study reported in the literature (Sheffi and Rice, 2005; Tang, 2006; Xu, 2008), for

example, is the "Albuquerque accident": "In 2000, a fire at the Philips Electronics plant in

Albuquerque, New Mexico, disrupted the flow of chips to cell-phone makers Nokia and

Ericsson. Both competitors depended solely on Philips for these particular chips and were

equally affected by the fire, but their reactions were very different. Nokia immediately sensed

the disruption and responded aggressively, invoking a special process developed for such

situations. It quickly became clear that the fire was a major disruption and the plant would be

out for months. Nokia dedicated 30 employees to work with Philips and other suppliers in order

to restore the supply. It also used different manufacturers, designed its handsets to use different

chips where possible and secured Philips entire worldwide capacity for manufacturing the

necessary chips. Ericsson, however, was not proactive and did not realize the seriousness of the

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chips had already been committed to Nokia. Consequently, Nokia achieved the sales plant while

Ericsson missed a critical new product introduction that resulted in an estimated revenue loss of

400 million Euros. Ericsson ultimately exited the business of making cellular phones."

The need to make a supply chain efficient and resilient has established different, robust

supply chain strategies (Tang, 2006). These strategies allow the organization to organize the

associated contingency plans efficiently and effectively when facing a disruption, making the

organization`s supply chain more resilient. This author proposes strategies based on: i)

postponement; ii) strategic stock ; iii) flexible supply; iv) make-and-buy ; v) economic supply

incentives; vi) flexible transportation; vii) revenue management; viii) dynamic assortment

planning and ix) silent product rollover. According to Christopher and Peck (2004), to create a

resilient supply chain (RSC), a number of principles must be applied:

 supply chain understanding, i.e., mapping and critical path analysis;

 choose supply chain strategies that keep several options open, i.e., opportunity to reduce

the impact of a disruption;

 re-examine the "efficiency vs. redundancy" tradeoff, i.e., the strategic disposition of

additional capacity and/or inventory at potential "pinch points" can be extremely

beneficial in the creation of resilience within the supply chain;

 a high level of collaboration across the supply chain can mitigate the risk, which in turn

be identified and managed;

 develop a clear view of the upstream and downstream inventories, demand and supply

conditions, production and purchasing schedules;

 and improve supply chain velocity and acceleration, i.e., streamlined processes, reduced

inbound lead times and non-value-added time reduction.

Peck (2005) concluded that supply chain resilience is more wide-ranging than integrated

supply chain management, business continuity planning, commercial corporate risk

management or political and public policy. For her, a degree of slackness in the system, whether

in the form of inventory, capacity, capability or even time, plus constant awareness and

vigilance, are needed if the supply chain is to become and remain resilient.

The attainment of resilience requires flexibility and redundancy (Xu, 2008): i) the flexibility

entail the creation of the organization`s ability to respond. These capabilities are mainly

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By using flexibility, the company redeploys some existing capacity in one area so as to make up

for lost or delayed capacity in another area; and ii) the redundancy entails maintaining the

ability to respond to disruptions in the supply network, largely through investments in capital

and capacity prior to the point of need (Xu, 2008). However, according to Tang and Tomlin

(2008) it remains unclear how much flexibility is needed and to which level the flexibility can

produce benefits. It is difficult to invest in flexibility when consistent data, exact cost and

benefit analysis are difficult to obtain (Tang and Tomlin, 2008).

Because RSC is a relatively new area of research, there are many opportunities for study:

Peck (2005) presented a framework for understanding SC vulnerability and a discussion of the

drivers of vulnerability; Sheffi and Rice (2005) discussed the stages of a disruption and

provided high-level recommendations for improved flexibility in the SC; Carvalho and

Cruz-Machado (2007) developed a framework for the design of a RSC and proposed a conceptual

"SC Resilient Index" and an "SC Resilience Indicator"; Ponomarov and Holcomb (2009)

presented an integrated perspective on resilience through a literature review and proposed a

conceptual framework for the relationship between logistics capabilities and SC resilience; Tang

(2006) identified several robust strategies to encourage success before, during and after a major

disruption; Xu (2008) delivered a framework for risk analysis in SCs, and developed approaches

for the creation of RSCs.

The frequency of events may be minimized by promoting best practices for increased

safety. However, it is impossible to control all risk factors and accidents, and eventually they

may occur (Xu, 2008; Carvalho and Cruz-Machado, 2007). The ability to avoid the events is

vital for the success of the SC and it is considered a supply chain resilience property.

2.1.5. Green Supply Chain

Organizations are becoming aware of environmental issues and global warming. Such

issues became even more complicated when entire SCs are considered (Venkat and Wakeland,

2006). SCM started to experience a paradigm shift with the growth of the environmental

movement, particularly the global consensus regarding humankind’s impact on climate change

(Lu et al., 2008). Organizations will have to expect questions about how green their

manufacturing processes and supply chain are (Lee, 2008). Some variables may come into play:

Customers will be making environmental requests about the products they are purchasing; and

government involvement may occur as technical and financial support or as tax-cut and

Modelling Lean and Green Supply Chain

Susana Carla Vieira Lino Medina Duarte